The UK’s manufacturing PMI has experienced its joint-sharpest rise in its 25-year history hitting 53.3 in August, up from 48.3 in July when it had been knocked by uncertainty post Brexit.
Weak sterling was the most important factor that manufacturers cited for the cause of the upswing, driving higher inflows of business from the US, Europe, Scandinavia, the Middle East and Asia.
The pound rose above $1.32 on the news, which was much higher than the consensus that PMI would hit 49 in the August survey.
The report warned that input costs had risen to a five-year high, exposing the flip side of currency weakness.
Manufacturing, which accounts for 15 per cent of the UK economy, had been the most resilient of the three PMIs in the aftermath of Brexit.
While it fell to its lowest levels since February 2013, construction fell to its lowest levels since the depths of the global financial crisis, while services fell at the steepest rate since records began.
PMIs for services, which make up 79 per cent of the UK economy, will be released next week.
Senior analyst at Hargreaves Lansdown Laith Khalaf says: “The sharp improvement in sentiment does cast some doubt over whether the Bank of England needed to cut interest rates at the beginning of August, though this is a bit of a chicken and egg situation.”
“The August manufacturing data also suggests inflationary pressure is starting to build in the system, as a weaker pound feeds through into higher prices.
“That’s going to put cash savers in the unenviable position of getting no return on their cash, while watching the cost of goods rise.”